Euro-Area Consumer Confidence Unexpectedly Fell in September

By Svenja O’Donnell -
Sep 20, 2012

Euro-area consumer confidence
unexpectedly declined in September, adding to signs the single-
currency bloc is sliding into a recession.

An index of household sentiment in the 17-nation euro area
dropped to minus 25.9, the lowest since May 2009, from minus
24.6 in August, the European Commission in Brussels said in an
initial estimate today. Economists had forecast an improvement
to minus 24, the median of 32 estimates in a Bloomberg survey
showed.

“The euro region’s fundamentals remain weak,” Thomas Costerg, an economist at Standard Chartered Bank in London, said
before today’s report was released. “Activity is impacted by
austerity measures, deleveraging and fragile confidence,” and
“a further rate cut by the ECB in the coming months looks
likely,” he said.

The euro area’s economy is sliding into a recession as
fallout from the fiscal crisis damps consumer spending and
corporate investment. The median estimate in a Bloomberg News
survey of 21 economists is for a 0.2 percent economic
contraction in the third quarter after a similar decline in the
previous three months. Retail sales dropped 0.2 percent in July
from the previous month.

European Central Bank policy makers on Sept. 6 agreed on
details of an unlimited bond-purchase program aimed at regaining
control of interest rates in countries such as Spain and Italy
and preventing a possible breakup of the common currency.

The central bank also forecast a deeper economic
contraction for 2012 than it did three months ago, predicting
euro-area gross domestic product will drop 0.4 percent this year
instead of 0.1 percent.

Euro-area manufacturing production contracted for a 14th
straight month in September, while services output shrank for an
eighth month, according to London-based Markit Economics.